Defendant pleads guilty to Seven Falls conspiracy

Published: Tuesday, March 12, 2013 at 3:12 p.m.

Last Modified: Tuesday, March 12, 2013 at 3:12 p.m.

ASHEVILLE — A defendant in the federal case against the developers of Seven Falls pleaded guilty to one count of conspiracy to commit bank fraud and agreed to work with authorities in the ongoing investigation, according to a deal approved in U.S. District Court on Monday.

Andrew Quinn Hager, who is free on $25,000 unsecured bond, faces up to five years in prison and a $250,000 fine on the conspiracy charge, according to court records. No date for his sentencing has been set, according to the U.S. Clerk of Court’s Office.

U.S. Magistrate Judge Dennis Howell ordered Hager of Hendersonville to have no contact with any of his co-defendants or with any possible victims and pre-trial witnesses in the case.

Prosecutors say that Hager conspired with co-defendants to defraud banks in a scheme known as the “lot loan program” in a bill of information filed in Asheville’s U.S. District Court on Feb. 26.

“As part of the scheme, the conspirators would solicit loans secured by undeveloped Seven Falls lots (both in their own names and in the names of those they recruited) from several different federally-insured banks. While the loans would appear to the banks as if they were traditional loans to individuals purchasing lots in Seven Falls,” they were in fact “short-term financing for Seven Falls and its developer, (Keith) Vinson, who was unable to take out additional loans,” according to the bill.

On Dec. 14, Seven Falls developer Keith Arthur Vinson entered a plea of not guilty to multiple federal counts, including wire fraud and misapplication of bank funds, through his lawyer. A jury trial for Vinson and five other defendants has been delayed by several continuances, and the next scheduled start date is April 23 in U.S. District Court.

All of the defendants except Hager have pleaded not guilty to what prosecutors say was a scheme to prop up the struggling 1,400-acre Seven Falls golf course community just south of Etowah. The development was announced with much fanfare in the summer of 2007, but work on the project stopped in early 2010.

The bill of information alleges that the conspirators applied for 25 loans from six banks from April 2008 through July 2008. “These loans generally were interest-only, two-year loans, with the principal due in full at the expiration of two years,” according to the bill.

As part of the scheme, prosecutors say Hager and another man applied for and received a $637,500 loan for a Seven Falls lot from the Bank of Asheville that closed on July 22, 2008.

“The purported sale price was $850,000 for this undeveloped lot, but Vinson offered a 25 percent ‘purchase credit,’ ” according to the bill, to appear to meet the Federal Deposit Insurance Corp.’s 75 percent “loan to value” requirement.

The credit allowed the conspirators to avoid putting any money down on the loans, according to prosecutors.

“Vinson promised to buy back the lot from Hager after two years,” according to the bill. “Hager overstated his income significantly in order to appear to qualify for the loan. Although Hager promised Bank of Asheville that he would repay the loan, he did not intend to do so. Instead, he served as a straw borrower for Vinson and his codefendants, and none of his own money was used to repay the loan.

“Vinson continued to market and sell these seemingly ‘sold’ lots as developer’s inventory. The conspirators agreed that if any of the ‘sold’ lots were later purchased by bona fide buyers that all of the proceeds of such sales would be applied to other lot loans,” prosecutors said in the bill.

“While verbal agreements with lot loan borrowers included the unconditional promise that Vinson would repurchase the lots after two years, the sales agreements contained different buy-back provisions — depending on the contract — in which Vinson had the option of repurchasing these lots after two years” before the loan principal came due, according to the bill. “Vinson agreed to pay co-conspirators who made these loans 1-2 percent of each loan’s balance per month as consideration of taking on the loans.”

The bill says that conspirators allowed “lending banks to rely on false and outdated financial statements that omitted the total amount of the borrowers’ debts and inflated the value of their assets,” including the omission of other lot loans from other banks.

While they cooked the books, Ollis filed “false and misleading appraisal reports,” according to prosecutors.

<p>ASHEVILLE — A defendant in the federal case against the developers of Seven Falls pleaded guilty to one count of conspiracy to commit bank fraud and agreed to work with authorities in the ongoing investigation, according to a deal approved in U.S. District Court on Monday.</p><p>Andrew Quinn Hager, who is free on $25,000 unsecured bond, faces up to five years in prison and a $250,000 fine on the conspiracy charge, according to court records. No date for his sentencing has been set, according to the U.S. Clerk of Court's Office.</p><p>U.S. Magistrate Judge Dennis Howell ordered Hager of Hendersonville to have no contact with any of his co-defendants or with any possible victims and pre-trial witnesses in the case.</p><p>Prosecutors say that Hager conspired with co-defendants to defraud banks in a scheme known as the “lot loan program” in a bill of information filed in Asheville's U.S. District Court on Feb. 26.</p><p>“As part of the scheme, the conspirators would solicit loans secured by undeveloped Seven Falls lots (both in their own names and in the names of those they recruited) from several different federally-insured banks. While the loans would appear to the banks as if they were traditional loans to individuals purchasing lots in Seven Falls,” they were in fact “short-term financing for Seven Falls and its developer, (Keith) Vinson, who was unable to take out additional loans,” according to the bill.</p><p>On Dec. 14, Seven Falls developer Keith Arthur Vinson entered a plea of not guilty to multiple federal counts, including wire fraud and misapplication of bank funds, through his lawyer. A jury trial for Vinson and five other defendants has been delayed by several continuances, and the next scheduled start date is April 23 in U.S. District Court. </p><p>All of the defendants except Hager have pleaded not guilty to what prosecutors say was a scheme to prop up the struggling 1,400-acre Seven Falls golf course community just south of Etowah. The development was announced with much fanfare in the summer of 2007, but work on the project stopped in early 2010.</p><p>Named as defendants are Vinson; real estate investor and private money lender Avery Ted “Buck” Cashion III of Lake Lure; real estate and private money lender Raymond “Ray” Chapman of Brevard; former president of Pisgah Community Bank Thomas “Ted” Durham of Fletcher; Certified Public Accountant George M. Gabler; and Certified Real Estate Appraiser Aaron Ollis.</p><p>The bill of information alleges that the conspirators applied for 25 loans from six banks from April 2008 through July 2008. “These loans generally were interest-only, two-year loans, with the principal due in full at the expiration of two years,” according to the bill.</p><p>As part of the scheme, prosecutors say Hager and another man applied for and received a $637,500 loan for a Seven Falls lot from the Bank of Asheville that closed on July 22, 2008. </p><p>“The purported sale price was $850,000 for this undeveloped lot, but Vinson offered a 25 percent 'purchase credit,' ” according to the bill, to appear to meet the Federal Deposit Insurance Corp.'s 75 percent “loan to value” requirement. </p><p>The credit allowed the conspirators to avoid putting any money down on the loans, according to prosecutors.</p><p>“Vinson promised to buy back the lot from Hager after two years,” according to the bill. “Hager overstated his income significantly in order to appear to qualify for the loan. Although Hager promised Bank of Asheville that he would repay the loan, he did not intend to do so. Instead, he served as a straw borrower for Vinson and his codefendants, and none of his own money was used to repay the loan. </p><p>“Vinson continued to market and sell these seemingly 'sold' lots as developer's inventory. The conspirators agreed that if any of the 'sold' lots were later purchased by bona fide buyers that all of the proceeds of such sales would be applied to other lot loans,” prosecutors said in the bill.</p><p>“While verbal agreements with lot loan borrowers included the unconditional promise that Vinson would repurchase the lots after two years, the sales agreements contained different buy-back provisions — depending on the contract — in which Vinson had the option of repurchasing these lots after two years” before the loan principal came due, according to the bill. “Vinson agreed to pay co-conspirators who made these loans 1-2 percent of each loan's balance per month as consideration of taking on the loans.”</p><p>The bill says that conspirators allowed “lending banks to rely on false and outdated financial statements that omitted the total amount of the borrowers' debts and inflated the value of their assets,” including the omission of other lot loans from other banks.</p><p>While they cooked the books, Ollis filed “false and misleading appraisal reports,” according to prosecutors.</p><p>Reach Weaver at emily.weaver@blueridgenow.com or 828-694-7867.</p>